Rising expectations

June 01, 1996
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by Teresa Acklin

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Global declines in total wheat use nearing an end, I.G.C. says.

In a comprehensive analysis of trends in world wheat consumption and the outlook for the 1996-97 season, the International Grains Council reported that the unprecedented fall in use in the 1990s was due to a cutback in feed use, while food use has continued to rise.

From the record high of 571 million tonnes in 1990-91, total wheat use has decreased in almost every year, to reach 546 million in 1995-96. A closer look indicates the decline during that period has been based entirely on a 35% drop in feed use of wheat; food use actually has increased by 10% in the period.

Feed use of wheat in 1995-96 reached a 14-year low of 87 million tonnes, compared with 133 million in 1990-91. The drop was largely because of falling demand in the Commonwealth of Independent States, the I.G.C. said.

Meanwhile, food use in the same period increased to 414 million tonnes from 375 million. The I.G.C. analysis noted the 2% a year increase in food use in the 1990s was less than in previous decades, but was still higher than the world's population growth rate.

The I.G.C. projected total wheat use in 1996-97 recovering to 560 million tonnes, made up of 425 million for food and 90 million for feed. The balance of 45 million tonnes comprises global seed and industrial use.

COLLAPSE OF F.S.U. FEED USE.

On a regional basis, most of the reduction in wheat use in the 1990s occurred in the former Soviet Union and central and Eastern Europe, where total wheat use fell 37% to 97 million tonnes estimated in 1995-96 from 153 million in 1990-91. Feed use alone in this area, reflecting the withdrawal of subsidies, the introduction of market economies and overall economic difficulties, slumped to only 33 million tonnes from 79 million, a collapse of 58%.

Food use was down a much more modest 5%, to 53 million tonnes from 56 million. And in looking to 1996-97, the I.G.C. forecast a gain of 1 million tonnes in both food and feed use in the F.S.U. and its former satellites.

In contrast with the F.S.U. downturns, consumption in developing countries, particularly in Far East Asia, has continued to grow during the 1990s, the I.G.C. said. Developing countries' use of wheat climbed to 318 million tonnes in 1995-96 from 296 million in 1990-91, a rise of 7%, with their share of global wheat use rising to 58% from 52% in 1990-91 and 46% in 1980-81.

Food use of wheat in developing countries has increased 15% in the 1990s, to 292 million tonnes in 1995-96 from 253 million in 1990-91. Developing countries accounted for 70% of global food use in 1995-96, against 67% in 1990-91 and 61% in 1980-81. But their feed use of wheat, usually low, actually fell to 8 million tonnes from 10 million in the 1990s.

CHANGING SOURCES OF DEMAND.

In the 1970s and 1980s, food use of wheat was growing fastest in sub-Saharan Africa, although starting from a low base point, the I.G.C. said. This increase was due to a combination of population growth and migration to the cities, where wheat-based foods were readily available and, because of internal transport costs, often cheap compared with local foods.

But the I.G.C. noted this trend had slowed, with Far East Asia now the fastest-growing region for food use of wheat.

"Rapid economic development is enabling more and more people in the region to broaden and diversify their diets away from rice and maize," the analysis said. "Far East Asia now uses 200 million tonnes of wheat annually for food, of which more than three-quarters is grown locally."

Steep advances in wheat prices have had only a limited effect on consumption levels, even in developing countries, the Council acknowledged. It cited a number of reasons for this anomaly, including:

• many countries rely on domestic wheat production for most of their food supplies, with developing nations as a group 75% self-sufficient in wheat. Wheat crops in 1995 were larger in some of the major consuming nations like India, Pakistan and Egypt;

In reviewing consumption developments in various areas, the I.G.C. noted that a pick-up in the Russian wheat harvest "might provide the opportunity to the domestic meat industry to start to recover." But the Council saw little opportunity for growth in food use in Russia or other C.I.S. countries.

In central and Eastern Europe, export demand competes with domestic feed requirements for available supplies, the I.G.C. said. Feed shortages have been noted in some countries, and there are signs of recovery in livestock production.

"The recent decline in the use of wheat for feed may be arrested, if not reversed," the Council said.

In the European Community, use of wheat for feed rose to a record 35 million tonnes in 1995-96, the Council said, because of a combination of reduced supplies of other feed, low internal prices due to reduced supports and the wheat export tax, high prices of non-grain feed imports and continuing growth in compound feed production.

"The determination of the European Commission to keep internal prices stable, and the likelihood of a particularly large crop in 1996, points to a level of feed use comparable with 1995-96," the I.G.C. stated. "It could even increase if consumers' health concerns about beef due to ‘mad cow' disease were reflected in increased consumption of pork or poultry."

In other developed areas, little change was projected in wheat use. Although feed grains will continue to be in short supply in the United States, wheat prices will probably be too high for any but local feeding to be economic, the Council said.

Along this line, if some exporting countries produce low-quality wheat this season, "it is possible," the Council stated, "that some may be exported at prices competitive with feed grains. On the other hand, if feed grain prices remain high, such wheat would probably be retained in the exporting countries for their own use."

After noting how price strength had relatively little impact on wheat use in 1995-96, the Council said that this could change in 1996-97.

"The costs of imports will be cumulatively more difficult for some developing importing countries to bear, while domestic prices may be raised as a way of encouraging local production," the Council said.

The analysis also noted wheat use could be affected by lower rice prices as the supply situation eased late in the current season. Thus, in countries such as Bangladesh, where consumption switches between wheat and rice depending on price, wheat use may fall.

The same is true in areas where white maize is the preferred grain, with a large crop possible in South Africa. As a result, food-deficit countries in sub-Saharan Africa may be able to avoid importing more wheat.